Hi @Chris Hansen ,
What's the version of Outlook (File>Office account>About Outlook), please first ensure that you have updated to the latest version.
Based on my tests on Outlook 365 Version 2104 (Build 13929.20296), it could work normally like below, which seems to I couldn't reproduce your issue and it may be related to your client itself.
So did other office client(such as Word) could work normally when you paste and type text? And are there any differences if you paste the text via "keep text only" ?
Considering it occur only recently, have you performed any specific operations before(such as install any programs or add-ins)?
In order to avoid the interference of add-ins, it's suggested to restart your Outlook in safe mode to check if the issue has any difference(Windows + R> type "Outlook.exe /safe"> enter).
Also, based on my research, I found some threads that mentioned it's a workaround to turn off the "Capitalize First Letter of Sentences", if you don't need this feature, it's suggested to uncheck this option for your normal use ( File>options>Mail>Compose messages>Spelling and Autocorrect…>Proofing>AutoCorrect Options> uncheck "Capitalize First Letter of Sentences ".
If your issue has any update, please feel free to post back.
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